New Jersey Federal Court Forces a Software Company to Confront the Question at Trial: Did Your Employee Quit or Was He Fired?

On May 23, 2019, the New Jersey District Court in Kunal Shah v. Meditab Software, Inc. refused to dismiss the retaliation claim of a software company’s former Chief Executive Officer, even though he notified the company of his intent to resign months before engaging in any whistleblowing activity, because the question remained: Did he actually resign, or was he instead actually fired?

Facts

Plaintiff, Kunal Shah, worked for Meditab Software, Inc., as the President and Chief Executive Officer. His employment contract required that he provide 90 days’ notice of resignation. In December of 2015, Shah emailed Meditab’s Board of Directors providing his 90 day notice of resignation. The subject line of Shah’s email stated: “Time to Move on.” However, Shah continued to work for Meditab for 4 months beyond his resignation date. The Chairman of Meditab’s Board emailed Shah stating that if he was “planning on quitting,” they needed to discuss his transition out of the company. In response, Shah said he “cannot continue to work” for the company. Shah apparently still believed he was employed because later that same day, he requested one week of leave for a back condition. The Chairman responded to Shah’s leave request, that Shah “ha[d] been terminated effective immediately[.]”

Weeks before he was notified of his termination, but months after Shah’s resignation would have become effective, Shah alleged that he engaged in two protected whistleblowing activities. First, Shah complained about Meditab’s alleged bribe of an Indian official. Second, Shah resisted Meditab’s request that he fire another employee, claiming that the requested termination was unlawful.

Shah sued Meditab alleging breach of contract relating to unpaid commissions and compensation earned; breach of implied covenant of good faith and fair dealing; retaliation in violation of the New Jersey Conscientious Employee Protection Act (CEPA); and wrongful termination. Meditab moved to dismiss Shah’s CEPA retaliation claim, arguing that Shah voluntarily resigned from Meditab months before “blowing the whistle.”

Court’s Decision

In order to prove his case for retaliatory termination in violation of CEPA, Shah must demonstrate is that, (1) he was the victim of an “adverse employment action,” such as termination; and (2) there is a causal connection between the whistleblowing activity and the adverse action, as might be the case if a termination shortly followed an employee’s blowing the whistle. A voluntary resignation is generally not considered an adverse employment action, and in this case, it predated the whistleblowing activity. Shah alleged in his complaint that he was involuntarily terminated, which would constitute an adverse employment action following his whistleblowing activity. Meditab argued that Shah voluntarily resigned, and thus, did not suffer an adverse employment action, and that he did so before engaging in any whistleblowing.

The District Judge denied Meditab’s motion to dismiss his CEPA claim of retaliatory termination because the evidence did not definitively demonstrate that Shah voluntarily resigned. While the Court acknowledged that Shah sent an email resigning before the alleged whistleblowing clearly stating his intent to resign, Shah continued to work for 4 months past the date his resignation would have otherwise taken effect and through the dates that he allegedly blew the whistle, until the day that the Board Chairman specifically said that Shah was terminated. Thus, that the question of whether Shah voluntarily resigned or was involuntarily terminated remained a materially disputed fact, warranting a trial.

Bottom Line

Although each employment case turns on the facts, employers cannot simply rest easy when an employee informs of his/her intent to resign. They also cannot count on avoiding wrongful termination lawsuits by somehow getting an employee to quit before firing him/her. What an employee characterizes as a resignation can still provide the basis for an adverse employment action leading to liability. Employers should be very clear with their employees about the status of their employment. If an employee submits notice of his/her intent to resign, an employer should confirm the resignation in writing and must communicate with the employee about next steps and document those communications. Courts are becoming less and less likely to dismiss a case summarily before trial, particularly where there is no documentation about the issue at hand.